Abbasi Madani attended a reception hosted by Riyadh's King Fahd for the Eid al-Adha feast, a major Islamic holiday, according to an Algerian government statement on Wednesday.
Madani was already behind bars for a range of charges in 1992 when the Algerian army intervened to halt the second round of a general election his Islamic Salvation Front (FIS) party was poised to win.
After the elections were cancelled and FIS outlawed, anti-government violence erupted against Algeria's secular administration which claimed more than 100,000 mainly civilian lives.
The historic FIS leader was finally freed in July 2003, along with his deputy Ali Belhadj. Last September, he was given permission to travel for medical treatment.
Madani was banned from participating in any political, social and religious activities. He signed a statement agreeing to these terms.
Belhadj refused to do so and remains in Algeria.
Both men were arrested in June 1991 as the FIS' political strength increased in the face of the once sole, governing National Liberation Front.
In July 2002, both men were convicted of state security offences and sentenced to 12 years in prison.
The government statement said authorities wanted to know what they described as the "real motive" behind why the Saudi authorities allowed Madani to attend a royal reception.